Another view: Feds should back states' efforts to protect consumers from predatory payday lenders

As states across the nation have taken steps to crack down on predatory payday lending practices, the lenders have forged alliances with what might at first seem like unlikely allies.

Some of the nation's largest banks have become a critical link between payday lenders and borrowers, enabling lenders to skirt state laws that put caps on interest rates, according to The New York Times.

It's time for federal lawmakers to take steps to ensure lenders cannot use the Internet and enlist the cooperation of big banks - which stand to make a tidy profit off fees - to get around state regulatory efforts.

Lawmakers in many states have passed restrictions intended to curb outlandish interest rates and terms that trap borrowers, many of them living paycheck to paycheck, in a debt spiral.

Payday loans are a convenient, short-term option for people who want to quickly raise cash. However, that convenience comes with a price, in terms of interest rates that can reach 300 percent or more when calculated on an annual basis.

About 12 million people annually get payday loans, according to a survey by The Pew Charitable Trusts. Almost a quarter borrow online.

A story Sunday in The Times spelled out how banks, including JPMorgan Chase and Wells Fargo, allow lenders to make electronic withdrawals from borrower accounts even in states where payday loans are banned, and sometimes even after borrowers have pleaded to stop the withdrawals. Federal law gives borrowers the ability to stop automatic withdrawals when they want.

Several U.S. senators, including Tom Udall, D-N.M., and Jeff Merkley, D-Ore., recently introduced a bill that would force all lenders that conduct their business online to follow the rules of the state where the borrower resides. The measure also would give the Consumer Financial Protection Bureau authority to shut down lenders who violate state and other consumer laws via the Internet.

Some states have tried to protect borrowers from the worst lending practices. Changing federal law to recognize reforms passed in states would enable these solutions to be enforced.